Alibaba, led by enigmatic chairman Jack Ma, is busily expanding well beyond its e-commerce roots, having recently announced plans for a New York IPO that will leave the company flush with cash to pursue new purchases.

Last year, Alibaba purchased a portion of mapping startup AutoNavi for $294 million. It has invested in messaging giant Weibo, spent $800 million for 60% of a television and film studio and taken a stake in Haier Electronics Group. On Monday, Alibaba said it will invest almost $700 million in a Chinese retail company as it seeks to profit from brick and mortar stores.

The foray into finance is, for China, a revolutionary development. It pits the country's tech companies squarely against state-owned banks, which are politically well-connected but hardly innovative.

Alibaba is offering a fund -- Yu'ebao -- that is so popular it attracted more than 60 million investors and 400 billion yuan ($65 billion) in its first eight months of operation.

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The big banks are now fighting back, and regulators may yet issue rules that would severely handcuff the efforts of Alibaba and Tencent.

Even if the finance play doesn't pan out, Tencent, Alibaba, and mobile upstarts like Xiaomi are helping to prove that one of the raps on Chinese companies -- that they can replicate but not innovate -- is outdated.

China has long been thought of as the factory that churns out the designs of companies like Apple (AAPL), while home-grown products suffer from a lack of innovation, uninspired design and poor execution.

But Tencent and Alibaba are rapidly expanding. Huawei, known for its telecom infrastructure products, is selling huge numbers of handsets. Four-year-old phonemaker Xiaomi frequently sells more phones in China than Apple, and is now planning a move into Southeast Asia.

Still, it appears that investors are worried about sky-high valuations for Chinese tech stocks -- much like they are concerned about the prices of Facebook, Twitter (TWTR) and other momentum stocks in the United States.

Shares of Tencent have fallen 10% in Hong Kong over the past month. The U.S.-listed stock for Sina (SINA), the parent of Weibo, has fallen nearly 30% so far this year. That makes it the worst performer in CNNMoney's Tech 30 index. Chinese search engine leader Baidu (BIDU) has also had a tough start to 2014.

So even if the big Chinese tech companies are making smart moves to diversify, investors don't seem to agree right now.

Charles Riley lives and works in Hong Kong, where he covers markets, economics and other high-impact stories across Asia. He previously worked for CNNMoney in New York and CNN in Washington. He tweets @CRrileyCNN